Plugging a contract into the calculator
Next, let’s look at an example contract and plugging it in to the calculator. For this example contract, let’s use the contract from Leasehacking 101: A guide to reading a lease contract
The goal here is to show a few different things:
- How to translate a contract to the calculator
- How the results from the calculator may not match the contract perfect
- How taxes may be calculated differently
Note that this is not the ONLY way to fill this out. Some values (such as trade equity) are handled differently here than how some others may choose to do so.
Here is the contract provided with some key information highlighted:
A few important notes:
- In some states, lease contracts do not show the MSRP
- Contracts typically state total “rent charge” amount, rather than money factor
- The contract may not say the sales tax percentage
- Due at sale amounts may not be all in cash, they often include trade equity or rebates. How these non-cash amounts are taxed varies by state.
Basic lease terms
We’re looking at a lease contract for a Mini, that is a 36 month term, with a monthly payment of $355.82, a positive trade equity of $3000, and a total due at sale of $4768.91.
Of that $4768.91, $3000 is positive trade equity and $1768.91 is cash due at sale.
As such, we would expect a calculator that matches perfectly to output $355.82 per month and $1768.91 due at sale
So let’s start filling this out.
The default values:
Make
Now, make is easy. This is a
MSRP
MSRP is easy if you know it. In this case, we don’t. If you know the actual MSRP put it here. Remember from earlier that the MSRP value listed is only used by the calculator to calculate residual value based on the percentage input. In this case, the contract provides a residual value dollar value rather than a percent of MSRP. We need to make sure that residual dollar value is correct.
As such, I will put the Residual Value here and then later, say the residual value is 100%.
RV is 
,
so
If you know the actual MSRP, put it here
Selling Price
Selling price is the agreed on value + any non-residualized extras - any trade equity (positive or negative)
The agreed on value is 
The trade value is 
As this is positive trade equity, we subtract it from the agreed on value. $35304-$3000=$32304
Note that the percent off MSRP is a ridiculous number as we didn’t include the actual MSRP.
Thus, the whole section should look like this:
Lease Terms
Term
From the contract, we know that this is a 36 month lease
Miles per Year
and that it is 10k miles per year
36,000 miles / 3 years = 10,000 miles per year
Residual Value
From the contract, we know that the residual value is
Now, the calculator doesn’t allow us to enter a dollar value for RV, only a percent. Because we set the MSRP above to $24180, if we plug in 100% here, the correct RV will be displayed. If you input the correct MSRP and the correct RV, it would also display $24180 here. As we don’t know those values, we couldn’t. If you know the correct RV and entered the correct MSRP above, use the correct RV here
Money Factor
Now, the contract does not display money factor. Instead, it gives us the total rent charge, so we will need to calculate the MF.
From the other Leasing 101 sections, recall that:
MF=(Total rent charge/term)/(adjusted cap cost+residual value)
In this case, MF= (3012.79/36)/(33138.65+24180.00)=.00146
We don’t have any MSDs being applied or special circumstances, so that ends this section.
Cap Cost Adjustment
Here we have no incentives, so the taxed and untaxed incentives are left blank.
We will re-visit the down payment amount to adjust our due at sale amount later, so let’s leave this at $0 for the time being.
Fees, Taxes, and Rebates
Note that on the contract, the fees may be found in two different places;
either the due at signing section
or the cap cost section
Acquisition Fee
Because we selected Mini as the make, the acquisition fee was auto-populated at $925. One should always verify with the contract, however, to be sure the correct value is here. Some brands have different values depending on the vehicle (Hyundai, for example, charges $595 on less expensive vehicle and $650 on vehicles over $40k) and some dealers mark up the acquisition fee.
Dealer Fees
This is typically just the dealer doc fee. It isn’t particularly important if a fee is added to the dealer fees section or the gov fee section, as long as it is captured. The sales tax numbers in these sections are ignored as they’re automatically calculated by the calculator.
Government Fees
Here we’ll end up summing a bunch of small fees, as well as title, and registration.
Total fees = 199.38+175.00+2.00+66.50 = 442.88
Sales Tax
As the sales tax percentage isn’t displayed on the contract, we will need to calculate it.
Sales tax percentage = ((monthly after tax/monthly before tax)-1)*100=((355.82/332.54)-1)*100=7%
Finally, this contract is from Florida where tax is applied to the monthly payment
With that all input, the calculator will output the following information:
Notice, that $361 per month with $1658 due at sale doesn’t quite match the $355.82 per month and $1768.91 due at sale we were expecting.
The monthly payment is higher but the due at sale is lower. We can tweak our down payment amount in the cap cost section to bring this closer to matching. Personally, I prefer to adjust the this value so that the monthly payments match. By changing the down payment amount, you’re essentially moving money away from the monthly section and to the drive-off section. You’re not making a significant change in overall cost, just changing from one bucket of money to the other.
If we add $150 to our down payment
The output will change
We’re now at $356 per month with $1814 due at sale. This is much closer to the $355.82 per month with $1768.91 we were expecting. There is essentially $45 up front difference in the calculator vs the lease contract. A small discrepancy is to be expected here. The calculator is not perfect and how taxes and such are calculated varies
Some of this difference can be seen in what the calculator shows for upfront taxes:
compared to what is on the lease contract
What is important, however, is that the numbers come out fairly close. You’re looking for large errors here. You can not use the calculator to perfectly account for every single dollar.
For reference, here is the completed calculator: